Noah Holdings Limited (NOAH) saw its shares soar Thursday on heavy volume.
Shares of the China-based wealth management provider rose by 7.2% to close the trading day at $21.63 with more than 2.7 million shares trading hands. This compares to the company’s average trading volume of 334,000 shares.
As you can see from the chart below, NOAH shares have been on a tear since early October, rising more than 79.3% since October 1, 2014.
The catalyst behind the recent move higher is most certainly based on a technical signal called “Strong on High Relative Volume,” which is used to identify stocks with major volume moves.
You see, significant volume moves often indicate underlying activity such as analyst upgrades, insider buying, or stock purchases by hedge funds and momentum traders.
This activity is frequently a strong signal of the start of a trend from which early investors can capitalize, but is also a trend that can run its course in a relatively short time.
So, the question for fundamental investors is whether NOAH is a solid stock pick aside from the technical indicator above.
Even a cursory look at the company’s financials shows the NOAH is a well-run company.
It has demonstrated strength in multiple areas, such as its hefty revenue growth, sturdy record of EPS growth, and profit margins.
In its Q3 2014 release, Noah Holdings reported net revenue of $62.9 million, a 51% increase over the same period one year ago.
In addition, income from operations came in at $22.9 million, a 34.6% increase over the Q3 2013 numbers.
While the company did experience a decrease in its operating margin, falling from 41% in Q3 2013 to 36.4% in the most recent quarter, the decrease hasn’t hurt the company’s bottom line.
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Net income attributable to shareholders was $17.9 million, a 28% increase over Q3 2013. This translated to diluted earnings per share of $0.32.
Over the past fiscal year, NOAH has increased its bottom line, growing to $0.93 from $0.42 in 2013. Better still, the company expects FY 2014 earnings to reach $1.26.
Client Metrics Look Good, Too…
In the company’s Q3 release, NOAH reported significant growth in both registered and active client lists.
The total number of registered NOAH clients for the quarter climbed by 31.9% to 66,069. Total active clients also saw significant growth, climbing more than 82.2% over the same quarter in 2013.
More importantly, the aggregate value of wealth management services grew to $3 billion, a 52.8% increase over the same period a year ago.
But the biggest factor in favor of a bullish view on NOAH is just the sheer size of the number of Chinese households with more than $1 million to invest.
According to the 2013 Chinese Private Wealth Report, the number of households with investable assets valued above $1.6 million has reached 700,000.
The report further states that the value of total investable assets in China right now is estimated to be $3.5 trillion, and would reach $5.8 trillion by the end of 2015.
And with 57 strategically located offices along the Yangtze River Delta, where most of the high-net-worth Chinese reside, NOAH is perfectly situated to capitalize on the needs of the Chinese elite.
This means NOAH should be valued significantly above today’s price – perhaps as high as $32 per share.